BrazilScaling from a start-up and scale-up to a grown-up company
For many successful start-ups and scale-ups, evolving to a fully-fledged company is accompanied by growing pains. Jonathan Aelterman (Möbius) and Frederik Tibau (Agoria) help young companies to overcome obstacles on the way to explosive growth – they outline six principles that can help start-ups and scale-ups through this delicate transition.
Best of both worlds
“If you go from start-up to scale-up, you have to professionalise,” says Aelterman. “You can no longer do without structure or processes. That’s not the sexiest part of doing business, but you have to tinker with your operations and your organisation if you want to scale.”
What is scaling? According to Aelterman, it is the process of growing your turnover “by double or even tenfold, without multiplying your workforce to the same extent.” Achieving such exponential growth can however only be achieve by “automating processes.”
Aelterman has been with Möbius for the last eight years. Currently an Associate Partner, he focusses on the services and retail sector in particular. Describing his work further, Aelterman cites scale-up duties being “a bit of balancing on a tightrope.” “Scale-ups need processes and structure – but too much of that risks them losing their dynamism and becoming too cumbersome to build on their early momentum against established competitors.”
“You have to reconcile the best of both worlds: combining setting up structures with the creativity of a start-up,” Tibau remarks. “The advantage of processes is that it paves the way for standards, working methods and principles. This is necessary when a company has reached a certain size. But you also have to be able to operate in an agile and responsive manner. If you lose that, you'll be in trouble.”
From founder to people manager
Tibau is a Project Lead for Scale-up Programmes at Agoria. He joined the company two years ago, and has since helped Belgian start-ups and scale-ups grow by offering practical tools and expertise with a strong focus on internationalisation.
Pointing to where he sees things often start to go wrong, Tibau suggests start-ups and scale-ups are “often led by entrepreneurs who have no experience with people management,” and while “creative jack-of-all-trades who start a company from scratch” often do well in the early stages, that lack of people management expertise gradually becomes more important.
Tibau continues, “As your company grows, you need to be able to delegate, organise and coordinate. And then a lot of your time has to go to people management and communication. A good and efficient communicator ensures that he keeps the overview and tells a consistent story, without getting lost in trivialities. This is not only important to the outside world, but also internally.”
“Scaling up a company is a people business. If you don’t bring your people with you in the journey, the transition will be rife with challenges. And getting all noses in the same direction is no mean feat.”
Of course, Tibau admits, there are exceptions. Some entrepreneurs do make great CEOs – but more often, they are not the best option. Founder and CEO are “different roles”, and if it doesn’t work out, founders need “the courage to recognise that your company may need a different kind of leadership” before passing the torch to someone else.
“You have different types of entrepreneurs,” agrees Aelterman. “The founders who shine in the start-up phase are not always the best profiles to further professionalise the company in the scale-up phase. You cannot combine all roles with each other. At some point you have to choose between an operational role and a strategic-tactical role. The longer you wait to make that choice and that switch, the more you stand in the way of the growth of your company.”
“Founders can safely stay on board, but in a role that suits them better and where their added value is greater,” Tibau asserts. “Mind you, that’s easier said than done, because your business is much more than just a business: it's your child. Still, there are some great entrepreneurs who manage to quickly appoint others to the CEO role at the companies they launch.”
Dare to say no
Expanding on Möbius’ work with fast growing companies, Aelterman says the firm “helps tweak growth strategies and with the translation to the organisation”. When it comes to drawing up a growth strategy, above all, start-ups need to dare to focus on something. It is no-longer the stage where the firm can be all things to all people. Should the customer experience be central? The product? The price?”
Aelterman suggests, “Choose what kind of company you want to be and monitor your course. That also means daring to say no. Scale-ups often run into problems because they start adapting products à la tête du client. They completely change their product for one customer.”
“As a start-up that urgently needs customers, you might still be able to do that. As a scale-up, you cannot turn your company upside down for every new customer. Unless you make the strategic decision that that one customer can open up a completely new market, but you have to consider that very carefully.”
At the same time, scaling up, companies cannot afford to underestimate the marketing function. According to Tibau, due to the “technical background” many founders have, “they put everything into research and development and product development” – but in fact, best practice shows that they need to invest twice as much in sales and marketing as in product development.
“We recurrently see that scale-ups underinvest in sales and marketing,” Tibau adds. “Striving for that perfect product is in the genes of founders. But if you wait too long before entering international markets, your competitors – who may have a less good product – will mow the lawn in front of you. It is a golden rule that a scale-up should invest twice as much in sales and marketing than in product development.”
Internationalisation stands or falls with the right profiles
Crossing borders to do business is an essential part of scaling. But while scale-ups might be “born global”, Tibau argues, internationalisation can still be easier said than done. What works in the Benelux, for example, cannot “simply be copied to a completely different and much larger market” – and entrepreneurs would be wrong to assume every market is the same.
Underestimating cultural differences, new competitors emerging in those markets, or alternate regulations, can all derail a scaling exercise. Explaining how to navigate this effectively, Tibau again cites the importance of delegation. “It is extremely important that you get the right people on board. Internationalisation stands or falls with the right profiles. It is preferable to work with local people who know their market through and through.”
“Scale-ups have a bit of a handicap there,” adds Aelterman. “Talent is scarce, and in other markets that talent is more likely to work for better-known names from larger markets than for a scale-up. This therefore requires that you fully capitalise on an authentic and attractive purpose, as well as formulate attractive employment conditions that fully stimulate entrepreneurship.”
Additionally, the pair suggest looking into the advantages of acquisitions and franchising. However, this can bring other difficulties: chiefly the difficulty of a cultural fit. It will take some searching for the right formula, and the ‘ideal approach’ can differ from market to market.
Inspiring successful examples
As with any business transformation, taking best practices away from other market leaders is a great place to get started. According to Tibau, “inspiring examples” of successful scale-ups include the likes of Adyen, Catawiki, Collibra, Odoo, and Team.Blue. – all of whom are not only “putting a turbo on their ecosystem” but “share their experiences, invest and also set up new businesses themselves.”
One example he notes in more detail is Deliverect, which had “already written a success story with Posios” before taking those experiences to found a new company. The company is now growing very quickly – due to its ability to attract capital and scale quickly. To that end, he adds that companies that receive the most capital “are therefore best armed on the global battlefield.”
Tibau adds an example of what can go wrong without sufficient financial muscle, in the form of Take Eat Easy. Founded by the entrepreneurs behind the Brussels e-bike manufacturer Cowboy, the scale-up in Belgium seemed to have potential to grow into a Deliveroo or an Uber Eats. However, the Brussels meal delivery company was “ultimately blown away by the hundreds of millions its competitors could raise to scale faster.”
Möbius is a management consulting firm with offices in Belgium, the Netherlands and France. Agoria is a network organisation for companies in Belgium. This article was previously posted on Bloovi.
